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1. Balance of Payment

2. BOP statement A BOP statement is constructed on the double entry system. Every transaction is represented by a credit and a debit. Both sides of the transaction---each credit and the corresponding debit should be recorded simultaneously, and at the same time or the date of occurrence should be recorded by both parties to the transaction.

3. The balance of payments records each transaction as either a plus (credit) or a minus (debit). The general rule in BOP accounting is specified as follows: Credit (+): A flow for which the country is paid- inflow of funds. E.g.: Exports of goods, services to foreigners, income generated from investing abroad, sales of assets to foreign investors Debit (-): A flow for which the country pays- outflow of funds. E.g.: Imports of goods, travel expenses in foreign countries, income paid to foreign investors, purchases of foreign assets That is, if a transaction earns or generates foreign currency for the nation, it is called a credit and is recorded as a plus item. If a transaction involves spending foreign currency, it is a debit and is recorded as a negative item. So, Total Credits+ Total Debits=0

4. An example of a transaction recorded in the BOP could be in a case where - Country A purchases $10 million worth of goods from Country B. The $10 million worth of goods in INFLOW to Country A is a debit and will be recorded as -$10 million. The payment of Country A to Country B, which is a $10 million check, will be recorded as a $10 million credit (+ $10 million). The amounts offset each other, so the overall BOP is zero. OUTFLOW INFLOW Money Goods +$10 million (credit) -$ 10 million (debit)

5. Official Reserve Official Reserve Transactions primarily involve the central bank of a country buying or selling foreign currencies. This action plays a pivotal role in managing the country's forex reserves. There are generally two types of official reserve transactions: Intervention Transactions : Transactions where the central bank intervenes in the foreign exchange market to maintain the exchange rate at a desired level. Transactions with the Domestic Banking System : These are transactions involving conversions of foreign currency deposits by domestic banks into local currency.

6. Residual items- Residual items are the things which could not be incorporated in any of the above types. In order to maintain the balance in the BOP, they are included in it. Following are the different types of residual things: 1) Errors and Omissions 2) Official Reserve Transaction

7. Balance of Trade- Balance of trade (BOT) is the difference between the value of a country's exports and the value of a country's imports for a given period. Balance of Payment- The balance of payment is the statement that files all the transactions between the entities, government anatomies, or individuals of one country to another for a given period of time.

8. Limitations of Balance of Payments Accounts Coverage of Transactions Classification of Items Agreements and their Implementation Valuation